EMPLOYEE CONSIDERATIONS
Whether you can collect in other states
from the comfort of your home base
or you have to maintain a presence in
another state, you may also have to
comply with state employee requirements
such as licensing for collection managers
or restrictions on using collector aliases.
Because a collection agency manager
has a lot of responsibility, some states
require them to go through a licensing
process to make sure they are qualified
to be in that position. This licensing
process can include taking and passing
an examination. Arkansas, Michigan and
Nevada are a few states that have this
requirement.
Some states also regulate what should
happen if the collection manager were
to leave the company or die. In New
Mexico, if a collection manager ceases to
be in charge, a notice must be given to
the state regulatory body within 10 days
of termination of employment. If the
collection agency does not comply, the
state may suspend the collection agency's
license until proof a new collection
manager is employed is provided.
Another area of consideration is the
use of collector aliases. If a collection
agency's employees use aliases, sometimes
known as desk names, the agency will
want to make sure that the state it is
expanding into allows this practice. While
some states prohibit aliases entirely,
other states may allow it but regulate
the practice. Often states will require a
collection agency to submit a list of the
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debt collectors' aliases to keep on file;
others may also impose an annual fee per
collector.
COMPLYING WITH STATE LAWS
Once the ins and outs of licensing are
in place, agency owners will want to
review the debt collection laws of the state
they are expanding into. While not an
exhaustive list, two items worth considering
include special text requirements and the
permissibility of adding fees.
Many states have special disclosures
that are required on letters sent to the
state's consumers. These disclosures may
be required on other correspondence with
the consumer, such as verbal conversations.
Some disclosures are only required on
correspondence for certain types of debt,
such as out-of-statute debt or medical debt.
Including multiple state disclosures into
a single form letter may seem like a fitting
solution when sending collection letters to
multiple states. However, this can open an
agency up to Fair Debt Collection Practices
Act liability. Some courts have held that
letters containing state-specific text for
a state in which the consumer does not
reside may be false, deceptive or misleading
under the FDCPA. Debt collectors will
want to consider their letters carefully and
determine whether or not sending out
multistate disclaimers in one letter makes
sense for their business practices.
Another area of potential liability is the
addition of collection fees, interest or other
charges. As a general rule, the addition of
any interest, fees, collection costs or other
expenses incidental to the original debt is
permitted when such amount is expressly
authorized by the agreement creating the
debt or permitted by law.
The legality of adding fees or interest
to an original debt depends not only on
the contract creating the debt, but also on
whether the law permits the collection of
that amount. It's imperative to look to the
provisions of specific state laws when making
this determination. State law varies widely
on this issue and when a contract does not
specify whether or not additional fees are
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